Chapter 5.S, Problem 9P

a)

Summary Introduction

To draw: A decision tree for the given problem.

Introduction:

Decision tree is one of the methods used in decision-making process. It would graphically represent the available alternatives and states of nature. It would also mention the payoffs and probabilities of the alternatives. It helps to choose the best alternative that would give the best result among the alternatives.

b)

Summary Introduction

To determine: Maximin alternatives

Introduction:

Maximin is the decision making method which is used to make decision under uncertainty. This method will find an alternative that maximizes the minimum outcome of every alternative or we can say that calculating the minimum outcome within the each alternative.

c)

Summary Introduction

To determine: Expected value of perfect information (EVPI) and interpret it.

Expected value of perfect information: It is the rate that a person is willing to pay to gain access to perfect information. A common area which uses expected value of perfect information is the healthcare economy. This value tries to evaluate the expected cost of the uncertainty, which can be interpreted as the expected value of perfect information

The expected value of perfect information can be calculated by using below given formula:

$\text{EVPI}\text{=}\text{Expected}\text{value}\text{with}\text{perfect}\text{information}-\text{Maximum EMV}$

d)

Summary Introduction

To determine: The sensitive analysis on P (high).

Introduction

Decision table is formats or visual representations were data is expressed arranged, determined and calculated to make a effective decision making. A decision table is a tabular representation that is used to analyze decision alternatives and states of nature.